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Financial Results

FY2018 2Q Presentation

Date October 31, 2018
Presenter Satoshi Hirano, President & CEO

Presentation Materials

. FY2018 2Q Financial Results (9pages)[452KB]
. FY2018 Full Year Plan(20pages) [2,563KB]
. Appendix(5pages) [810KB]

Summary of the Presentation

1. Consolidated earnings for the first quarter of FY2018.

Significant increase in earnings

Net sales were 70,271 million yen (up 3.3% YoY), mainly on higher sales in the US, Europe, and Japan.
Operating income was 5,268 million yen (up 15.3% YoY) and ordinary income of 4,742 million yen (up 16.0% YoY) on higher net sales and the benefits of COGS reduction. As a result, income attributable to owners of parent was 2,146 million yen (up 15.0% YoY).

FY2018 1Q Financial Results

*1 According to change in Japanese Accounting Standards, the former Net Income is shown as "Profit attributable to owners of parent" on financial statements.

Financial Results by business segment

[Positioning Company]
Net sales were 37,018 million yen (up 3.2% YoY), mainly on sales growth for IT Agriculture products. However, operating income was 3,740 million yen (down 3.3% YoY) due to up-front investments for advanced technology development.

[Smart Infrastructure Business]
Net sales were 18,207 million yen (up 6.8% YoY), mainly on sales growth for our mainstay product Total Stations. Operating income was 2,856 million yen (up 75.2% YoY) on higher net sales and the benefits of COGS reduction.

[Eye Care Business]
Net sales were 21,828 million yen (up 2.0% YoY), mainly on sales growth in Japan, Asia, and Oceania. Operating income was 636 million yen (up 20.9% YoY).

2. FY2018 Consolidated Earnings Targets

There is no change in our earnings forecasts for the cumulative consolidated fiscal year previously released on July 31, 2018.
We will pay close attention to future transitions in earnings and market trends, and provide timely disclosure in the event of any changes that require a revision of our earnings forecasts.

FY2018 Full Year Plan
*1 According to change in Japanese Accounting Standards, the former Net Income is shown as "Profit attributable to owners of parent" on financial statements.
*2 Assumed exchange rate for 2H.


Please indicate your full-year forecast for IT construction sales growth broken down for OEM and aftermarket sales.

There was a temporary slow down in 1H aftermarket sales. On the other hand, OEM sales were steady. We will eliminate the problem of temporary slow down in 1H and forecast double-digit growth rate for 2H and overall expect growth in line with original forecasts.

Is it correct to assume that despite a temporary slow down in sales growth for IT construction, latent market demand is still strong?

Yes. Despite a nervous market in the US due to factors such as interest rate hikes, which caused a decline in the number of housing construction orders, surveying-related business is steady. Overall, we are seeing no immediate significant impact. However, we are not necessarily optimistic about the current environment and intend to pay close attention to ongoing trends.

Please indicate the rate of operation in the case of the optical chain that installed 200 OCTs for their stores. Also, is there potential for such integration by other optical chain?

Presently all OCTs are in full operation. According to the press release issued by the optical chain in question, they used OCT to conduct eye exams for 250,000 people, of which 10,300 people were detected as showing symptoms of glaucoma. This case study shows the OCT's contributions to generating value added services in the form of the early detection of eye diseases. The optical chain has also decided to integrate units into 50 stores in Northern Europe. The industry is viewing this as an innovation development so we hope this will lead to similar outcomes with other optical chain.

Please discuss your thoughts on the future speed of dissemination for AI diagnosis systems.

In terms of sales in the US market, we already have received an order from IDx for 100 units of the NW400. In near future, we are anticipating sales of approximately 1,000 units on an annual basis.

In the Eye Care Business, despite positive news related to the 3D OCT and retinal cameras, 2Q revenues were down. Were other products impacted by changes in sales?

One factor is that for the OCT we had to take lower prices in certain cases with competitive pricing against competitors. There has been no impact with other products..

OEM sales grew significantly for IT agriculture but please discuss your ability to withstand downturns in the market environment such as unexpected grain price declines and greater pessimism towards agricultural investments.

Several years prior, there were not many OEM so there was volatility on IT agriculture sales. However, now there are some 250 OEM companies of various sizes. We have established a business model that reduces our dependence on any one company to ensure more level operations. We also are increasing our balance in terms of region-specific dependence. As such, we have increased our ability to withstand irregular phenomena occurring in specific regions, such as the trade friction between the US and China.

I understand that excavator control is complex and, compared to dozers, automation is much more difficult. Please discuss what technical improvements you have achieved.

As you are aware, automation of excavator is very difficult. We achieved an automation system for aftermarket sales by strengthening collaborations with construction machinery manufacturers and by increasing our own technology development level. In Japan and Europe, excavator is a big market and we are anticipating growth in the future.

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